WA red-faced over China’s powerless mine

The West Australian government faces an embarrassing visit from high-ranking Chinese officials this week who will be in town to mark the beginning of construction of their mine in the state’s midwest.

Despite being due to host an official dinner for the dignitaries on Thursday night, the state government is yet to approve the building of a $360 million power line to the area which is necessary for Asia Iron’s Extension Hill mine to begin operation.

Regulatory hurdles and state government inaction on clearing the funds for the power line could delay the scheduled 2014 start of the $3 billion magnetite mine, which is backed by the Chinese municipal government in Chongqing.

Though there have been concerns about a slowing Chinese economy, the destination for the mine’s exports – Chongqing, 1400 kilometres west of Shanghai – is booming.

It is a focus for official development, and is growing at double-digit rates. The municipal government plans to use the Extension Hill mine’s ore to underpin a new steel precinct near its capital of 35 million people.

Asia Iron managing director Bill Mackenzie told The Australian Financial Review that final Chinese approval to build the mine was expected early next year, but there would be a ceremony on site on Friday to mark the start of an already approved mine construction village.

He said the power line would be essential for the mine to proceed. “We need the power line to the midwest, we have been expecting it to be built," he said yesterday. “It has been sitting inside the [WA government’s] budget papers for nearly 18 months."

Energy Minister
Peter Collier
said that a recent $150 million increase in the power line’s cost was related to a decision by network operator Western Power to acquire part of a spur line from another miner in the region, ­
Gindalbie Metals
.

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He has said the green light for the line would partly depend upon regulatory approval.

Earlier this month, the state’s economic regulator attacked the project as posing an unacceptable risk to taxpayers, as it would increase the cost of power bills if Western Power were forced to bear the full cost of the project. Western Power defended the line, and said that it met the technical power needs of the region.

The utility said it was refining its business case following the economic regulator’s latest determination.

It said the purchase of Gindalbie’s spur line was necessary to ensure access to other companies.

Gindalbie said it was disappointed at the regulator’s decision as the project was necessary for the emerging mining area.

The Extension Hill mine will also be a key customer for the troubled ­proposed Oakajee port.